What The Demi-Ashton Ratio Means For Emerging Market Stocks

From Deutsche Bank’s Ajay Kapur, an interesting discussion of demographics and what they mean for emerging market equities:The predictable path of demographic pigs in pythons has important clues for financial markets.We have done some work, building on original research, relating the Demi-Ashton ratio (folks intheir 40s to their 20s) to long waves in equity markets (see The Investigator, 10 ProvocativeObservations, 17 November 2010). Also, we have written about the “youth bulge” – the ratio of
young men to older men – as highly correlated with economic and political openness, political
instability, and consequently, equity market performance (see The Investigator, Youth Bulges
and Equities, 28 February 2011). The upshot of this work: markets with a rising Demi-Ashtonratio and a falling “youth bulge” ratio have excellent long-term prospects. Happily, mostemerging markets qualify – indeed, we think these two demographic drivers are the only two
reasons to be bullish on the asset class over the long run. (The usual rhetoric about higher GDP
growth than the developed world has been true almost every year in living memory, is a
misleading indicator, and at best is marketing obfuscation.)